1. If interest is compounded continuously, at what annual rate will a principal of P quadruple in 30 years? [3]
2. Find the present value of $100 due in 3 months if the rate is 11% p.a. simple interest. [2]
3. A trust fund is being set up by a single payment so that at the end of 30 years there will be $50,000 in the fund. If interest is continuously compounded at an annual rate of 6%, how much should be paid into the fund initially. [3]
4. Presently, the Njenga’s have Kshs. 50,000 to invest for 18 months. They have 2 options open to them:
a) Invest the money in a certificate paying interest at the nominal rate of 5% compounded quarterly.
b) Invest the money in a savings account earning interest at the annual rate of 4.5% compounded continuously.
How much will they have in 18 months with each option? [6]
5. Find (i) the amount of compound interest (rounded to two decimal places) and (ii) the effective rate of interest (to three decimal places) is $1,000 is invested for 5 years at an annual rate of 7% compounded:
a) Quarterly [4]
b) Monthly [4]
c) Weekly [4]
d) Daily [4]
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